Problem 12-25 Volume Trade-Off Decisions [LO12-5, LO12-6) The Walton Toy Compeny
ID: 2561098 • Letter: P
Question
Problem 12-25 Volume Trade-Off Decisions [LO12-5, LO12-6) The Walton Toy Compeny manufactures a line of dolls and a sewing kit. Demand for the company's products is increasing, and management requests assistance from you in determining an economical sales and production m the coming year. The company has provided the following data: Demand selling Next year Price Direct Direct (units) per Unit Materials 58,0e0 $26.89 50,eee 7.se 43,000 $41.50 $7.64 48,eee %11 . ee 2.80 2.70 333,000 8.8 $4.0 Labor Debbie Trish Sarah 41.50 $1.30 2.1 3.90 $5.18 $1.90 0.78 Sewing kit s e.48 The following additional information is available: The company's plant has a capacity of 92190 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b The direct labor rate of $6 per hour is expected to remain unchanged during the coming year c Fixed manufacturing costs total $600,000 per year. Variable overhead costs are d. All of the company's nonmanufecturing costs are fixed e. The company's finished goods inventory is negligible and can be ignored. $3 per direct labor-hour Required: 1. How many direct labor hour 2. How much 3. What s are used to manufacture one unit of each of the company's five products? variable overhead cost is incurred to manufacture one unit of each of the company's five products? is the contribution margin per direct labor-hour for each of the company's five products? that direct labor-hours is the company's constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? 5. Assuming that the company has made optimal use of its 92,190 direct labor-hours, what is the highest direct labor rate per hour that Welton Toy Company would be willing to pay for additional capacity thet is, for added direct labor time)? Complete this question by entering your answers in the tabs below Required Required 2 Required 3 Required 4 Required How many direct labor hours are used to manufacture one unit of each of the company's five products? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Direct labor hours per unt Required 2> Reference linksExplanation / Answer
1) Debbie Trish Sarah Mike Sewing kit direct labor cost per unit 2.1 0.78 3.9 2.7 0.48 direct labor rate per hour 6 6 6 6 6 direct labor hrs per unit 0.35 0.13 0.65 0.45 0.08 2) variable overhead cost incurred Debbie Trish Sarah Mike Sewing kit variable overhead cost per hour 3 3 3 3 3 direct labor hours per unit 0.35 0.13 0.65 0.45 0.08 variabe overhead cost incurred 1.05 0.39 1.95 1.35 0.24 3) total contribution margin Selling price 26 7.5 41.5 11 8.8 less:Variable costs direct materials 5.1 1.9 7.64 2.8 4 direct labor 2.1 0.78 3.9 2.7 0.48 variable overhead 1.05 0.39 1.95 1.35 0.24 total variable costs 8.25 3.07 13.49 6.85 4.72 contribution margin per unit 17.75 4.43 28.01 4.15 4.08 direct labor hours per unit 0.35 0.13 0.65 0.45 0.08 contribution margin per hours 50.71 34.08 43.09 9.22 51.00 answer demand CM total product per uni contribution Debbie 58,000 17.75 1,029,500 trish 50,000 4.43 221500 Sarah 43,000 28.01 1204430 mike 48,000 4.15 199200 sewing kit 333,000 4.08 1358640 total contribution margin 4,013,270 4) DLH per estimated total product unit sale units hours Debbie 0.35 58,000 20300 trish 0.13 50,000 6500 Sarah 0.65 43,000 27950 mike 0.45 48,000 21600 sewing kit 0.08 333,000 26640 total hours required 102990 Allocated units contribut total total produced per unit contribution product hours Debbie 20,300 58,000 8.9 516200 trish 6,500 50,000 3.4 170000 Sarah 27,950 43,000 13.61 585230 mike 10,800 24,000 4.2 100800 sewing kit 26,640 333,000 3.1 1032300 total hours required 92,190 2404530 answer 5) highest price will be $6 direct labor rate +$9.22 contribution margin per hours 17.22